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How to Use a Secured Line of Credit for Your Business

Posted On : Feb-06-2012 | seen (846) times | Article Word Count : 511 |

Most business owners need to use some sort of borrowing in order to maintain their business and meet regular expenses, as well as those that come up unexpectedly. And nearly all business owners need to borrow when they’re just starting up their business and don’t yet have the capital for start-up costs.
Most business owners need to use some sort of borrowing in order to maintain their business and meet regular expenses, as well as those that come up unexpectedly. And nearly all business owners need to borrow when they’re just starting up their business and don’t yet have the capital for start-up costs. While many business owners consider things like credit cards or business loans for these expenses, a secured line of credit can be a much better option.

A secured line of credit is a type of loan in which the borrower puts something of value up as collateral, should they default on the loan. If the business owner is also a homeowner, they can use the home as collateral by taking out a secured line of credit on it. Doing so can be risky, as the business owner could be putting their home at risk should the business fail, but it can also be a reasonable option to get a business off the ground.

It is much more ideal however, if the business owner owns the building their company operates out of. A secured line of credit could be taken out on this property and the business owner’s home would never be in jeopardy.
Secured lines of credit can also be great options for business owners that need to have cash available at all times for expenses, but don’t want to use a business credit card for those expenses. Credit cards, even those aimed at business owners, carry an extremely high interest rate and will never save a business owner money.

A secured line of credit works very much like a credit card, with the owner only needing to pay the interest back every month but having cash available to them whenever it’s needed. However, the interest rate is much, much lower and sot the loan is easier to pay off quickly.

Whatever you’re using the line of credit for, and whether your home or your office building is being used for collateral, it’s extremely important that you consider what you’re using your line of credit for. Using the extra money available to buy yourself a second car or to take your family on vacation is an irresponsible way to use the extra funds; but using it to pay your employees or replace old equipment is not.

Business lines of credit should always only be taken out for business purposes. This ensures that you’re putting the money back into your business and that you’ll likely profit from the investment. It also ensures that should your business fail or you’re unable to repay the loan that your personal life doesn’t suffer for it.

A line of credit can be just the answer to small and large businesses alike, whether they’ve just opened their doors or have been open for decades. But just like any other decision you make for your company, you must look at it as a business decision – and do what’s best for the business.

Article Source : http://www.articleseen.com/Article_How to Use a Secured Line of Credit for Your Business_144769.aspx

Author Resource :
Bryan J is the author of this article. For more information about Secured line of credit and line of credit please visit canadianmortgagesinc.ca.

Keywords : Secured line of credit, line of credit,

Category : Finance : Credit

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